Threat of China exporting EVs to Canada has government, auto sector concerned

Canadian manufacturers are concerned about reaching the goal set by the federal government to achieve 100 per cent zero-emission vehicles by 2035. However, there is also a concern about the threat of China exporting inexpensive electric vehicles into the country.

That concern is shared by David Adams, President and CEO of the Global Automakers of Canada, who also sees this as an issue that could undermine Canada’s own ZEV efforts. Adams told Canadian auto dealer that the “existential threat” of China shipping cars to Canada is legitimate and could impact the $46 billion in foreign direct investment in Canada for manufacturing EVs and batteries.

“It could all be for nought if these vehicles (from China) that are heavily subsidized are allowed into the market,” said Adams. “The reality is it is going to take a few more years before we are producing EVs in Canada, and even longer to get to scale to really drive down cost.” 

Earlier this week the Canadian government announced it will begin a 30-day consultation process to seek views on potential policy responses, including a tariff on Chinese exported EVs, and possible additional measures such as adjustments to the federal Incentives for Zero-Emission Vehicles (iZEV) program and investment restrictions.

The Canadian Government will also consider perspectives on policies driving China’s overcapacity and surging exports of EVs, including labour and environmental standards, and unfair and non-market practices. The United States and the European Union have already announced increased trade protections on Chinese EVs.

“Canadian workers and the auto sector are facing an intentional, state-directed policy of overcapacity, undermining the Canadian EV sector’s ability to compete in domestic and global markets,” said Chrystia Freeland, Canada’s Deputy Prime Minister and Minister of Finance. “This consultation will consider what action we can take to protect our workers, level the playing field, and prevent transhipment or oversupply from China’s anti-competitive practices.”

Adams said he is hearing the Canadian government may act quickly once the consultation process has concluded. He said there is a growing percentage of Chinese-produced EVs that are flooding into worldwide markets.

“Our association’s position on trade policy for the 19 years that I have been here is that it needs to be fair and needs to be open,” said Adams. “I think what we’re looking for from the government out of this process is that standard is maintained with respect to whatever mechanism they end up putting in place at the end of the day.”

He said there is a disconnect between our environmental policy and our industrial policy. 

“The government wants everyone driving EVs, and right now most of those come from outside North America,” said Adams. “So it is going to take us a while to get our battery plants and our EV assembly plants built up and running. There are some saying ‘I don’t care where my EV is made. I just want to be able to afford one.’”

Adams said this logic is shortsighted if our desire is to build and retain the auto industry in Canada, and make the most of the $48 billion in foreign direct investments to employ Canadians for decades to come. “However, from the consumer’s perspective, affordability is a huge issue,” he added.

Flavio Volpe, President of the Automobile Parts Manufacturers’ Association, spoke at the event where Freeland made her announcement, and later posted on LinkedIn about the significance of the potential harm to the Canadian automotive industry if China begins exporting vehicles and parts to Canada. He said the $46 billion in foreign direct investment needs time to bear fruit.

“Rushing instead to accommodate a flood of cheap, clean cars from the world’s worst polluters and lowest-paying employers is not a coherent climate strategy,” said Volpe. 

At a recent forum in Toronto, Canadian auto dealer publisher Niel Hiscox said the potential for China sending vehicles to North America is “going to be very real and may be very quick to arrive.” He also said that “Clarify Group, our research and consulting arm, is already getting reach-outs from Chinese OEMs looking to market entry assistance.”

He said Chinese exported vehicles have already had a significant impact on Europe and South America.

“North America is about the only place on earth that is not yet feeling the impact of Chinese vehicles,” said Hiscox. “More than a few economists have said that if the current initial impact in Europe extrapolates, some legacy European and North American OEMs may be challenged to survive.”

Hiscox said Chinese automakers are estimated to have the capacity to produce about 50 million cars a year, of which about 60 per cent are consumed domestically.

“Those are wild numbers, so that means millions of cars available for export markets because they’ve already been built,” said Hiscox. “Effectively, China has the capacity to supply virtually every single market on earth. It gives us a sense of how important all of this is. Based on the experience in Europe and elsewhere, the vehicles that are going to come over are good vehicles that consumers will embrace.”

He also said China is building car plants in Mexico at an accelerated pace, which means those vehicles will be protected from tariffs because of the United States, Mexico, and Canadian trade agreement.

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